Commercial

Rents lift for suburban retail property

Retail business strategies are continuing to evolve in the post-pandemic operating environment, says JLL in its latest market snapshot.

Tuesday, June 27th 2023

In the Auckland suburban retail sector, where many mum and dad investors have holdings, average prime rents rose by $25/m2 or 2.7% in the first quarter of this year after remaining unchanged since early 2021, and now stand at $950/m2.

Although vacancy is expected to drop, backfill of existing vacant space needs to be occupied, in order for rents to start increasing, so further increases are not expected this year. 

Another factor stabilising rents is many smaller scale retailers developing their online shopping platforms, and do not need additional retail space for their business to grow.

Suburban vacancy dropped to 9.4% from 11.9%, signifying more than 5,000m2 of space being leased in the first quarter across multiple locations.

On the supply side, 110m2 of retail space in a mixed-use property at 110 Carlton Gore Road was completed in the quarter.

Other developments are underway at Auckland Airport’s Manawa Bay, comprising 100 stores in the premium outlet shopping centre.

Then 10km down the road at Onehunga, Lendlease’s significant $100 million, 7,060m2 three-level retail development planned between Dress Smart and Onehunga Mall has been started.

These developments are expected to be completed by the end of 2025, which will add to the retail landscape.

Asset performance

After softening by 25bps at the end of last year, average net yields for prime and secondary suburban remained unchanged for the first quarter.

Prime and secondary stand at 6.63% and 9.25% respectively. Average net yields for shopping centres also remained unchanged, at 8.63%.

On the other hand, average net yields for bulk retail softened by 13bps to reach 7.75%.

This was the only retail sub-sector with a movement in yields for the first quarter, owing to investor interest in this asset class during last year.

Only one significant transaction for this market was concluded in the first quarter. A property at 9 Rose Road, Ponsonby sold for $8.1 million, at an initial yield of 4.20%.

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